While this week has been (mostly) all about the elections at the Weekly, the investigative journalism group California Watch, founded by the Berkeley-based Center for Investigative Reporting, sent us back to the future, with an examination of how the subprime fallout is still – still – impacting homeowners, even ones who no longer own their homes. In late May, California Watch issued its report on second-mortgage debt, a bizarre little subculture of the bizarre mortgage industry, and how a Texas company called Heritage Pacific Financial is capitalizing on the second-mortgage debt industry by suing homeowners who had second mortgages, but already lost their homes to foreclosure. Heritage Pacific didn’t issue the loans – in fact, they never issued the loans. Instead, Heritage Pacific bought up second mortgage debt issued to borrowers who had stopped paying. It gambled on buying up bad debt, and now it’s using the court system to go after the borrowers, who in at least some cases thought they were clear due to bankruptcy or foreclosure. During the real estate boom, California Watch’s Rick Jurgens reports, about 25 percent of homebuyers took a second mortgage rather than making a down payment; Heritage Pacific is now going after those borrowers claiming they committed fraud in obtaining those loans.

So far, they’ve demanded payments from thousands of borrowers in California, and sued hundreds. They’ve also sued for amounts less than $150,000, even though state law prohibits suits alleging fraud on mortgages below that amount, Jurgens reports.

Right now, Heritage Pacific is on the receiving end of a class-action suit in Santa Clara County. Based on California Watch’s astonishing, down-the-rabbit-hole story, we figured Heritage Pacific must have a presence in the Monterey County Superior Court system – our region was one of the state’s hardest hit during the subprime fallout – and we were right. So far, Heritage Pacific has sued five borrowers they allege committed fraud in loan applications. In one case, a house painter who purchased an East Salinas home in 2006 reported a monthly income of about $11,000; in reality, his annual income was about $14,000.

Clearly a misrepresentation, but one that was made thousands of times during the bubble with the encouragement or tacit approval of shady hucksters masquerading as upstanding loan officers, mortgage brokers and professional Realtors. “No verifiable income, no problem,” was the rallying cry during the insanity. (As Pamela Simmons, one of the class-action attorneys, put it, “If your dog had a dog house, he could’ve gotten a mortgage on it.”) Heritage Pacific is also suing a Monterey County woman for not only misstating her income, but because her birthday was incorrect by three months on the paperwork.

Another borrower, Evaristo Aguirre, is described by his bankruptcy attorney, Salinas’ Kevin Dougherty, as totally illiterate and not knowing a word of English. Dougherty told Weekly reporter Sara Rubin that Aguirre never finished grade school in Mexico.

Aguirre, a farmworker who lived in Salinas, helped a friend out with a mortgage for a home in ultra-pricey Los Gatos by signing on the dotted line – something he thought he could do in America.

“They go after people that are uncollectable, mostly Hispanic people who are afraid of the law,” Dougherty says.

One other thing the people had in common: Most of them had never heard of Heritage Pacific.

Heritage Pacific was launched by twin brothers Chris and Ben Ganter. If their names sound vaguely familiar, shame on you: You’ve been watching bad reality TV. The brothers starred on the show PayDirt, which focused on the Dallas-Fort Worth real estate market. PayDirt was also the name of the Ganter’s Real Estate Investment Trust, or REIT. In a video, Chris Ganter mocks homeless people while trying to get investors for the REIT: Democrats, he says, want everyone to have a home, even “Mr. Homeless Guy.” (You can view the video at http://tinyurl.com/6r53sx9).

While www.paydirtreit.com is no longer operational, Ganter’s charming video lives on; the Internet, the Ganters are finding out, is forever. Ben Ganter, the other brother, tells Rubin: “They did film us in PayDirt. I would love to forget it.”

On Heritage Pacific’s website, the company says it’s “committed to assisting the FBI and other governmental agencies in bringing those individuals and entities to justice” who engaged in fraudulent conduct against borrowers.

Asking the FBI to look into mortgage predators? Careful what you wish for, Ben, or you will surely get it.

Mary Duan is the Weekly’s editor. Reach her at mary@mcweekly.com. Sara Rubin contributed to this report. To read Rick Jurgens’ California Watch story, go to http://tinyurl.com/d3az4dh